The UK government has launched a national hydrogen strategy aimed at unlocking £4bn ($5.5bn) of investment by 2030 and creating an industry capable of delivering about a third of the country’s energy by 2050.

The long-awaited strategy builds on a ten-point plan for a “green industrial revolution” unveiled last year by Prime Minister Boris Johnson and pledges about £1bn in direct funding as well as market-based incentives similar to those used to drive the rapid growth of UK offshore wind.

“Today marks the start of the UK’s hydrogen revolution. This homegrown clean energy source has the potential to transform the way we power our lives and will be essential to tackling climate change and reaching net zero,” says UK energy minister Kwasi Kwarteng, who has come under growing pressure from industry and investors to clarify the strategy.

“Our strategy positions the UK as first in the global race to ramp up hydrogen technology and seize the thousands of jobs and private investment that come with it” Kwarteng, UK energy minister

“With the potential to provide a third of the UK’s energy in the future, our strategy positions the UK as first in the global race to ramp up hydrogen technology and seize the thousands of jobs and private investment that come with it,” he says.

The government has kept its options in terms of clean hydrogen technology, adopting a “twin-track” approach with backing for multiple technologies, including both green and blue hydrogen. The government says it will provide more detail on its hydrogen production strategy next year.

The new strategy reiterates the government’s overall target of 5GW of production capacity by 2030, which was set out last year and has been criticised as over-ambitious by some in the industry, given the very low base from which the sector is starting.

Renewables industry group RenewableUK urged the government to focus more clearly on green hydrogen or risk losing out on private sector investment ahead of this year’s Cop26 talks, which are being hosted by the UK in Glasgow.

“In the year when the UK is hosting the biggest climate change summit for years, we fear that international investors in renewable hydrogen may compare this strategy to those of other countries and vote with their feet, says RenewableUK CEO Dan McGrail. He called on the government to set a new target of 5GW hydrogen electrolyser capacity by 2030.

In addition to its focus on production, the  government also pledges to review the development of hydrogen infrastructure, the lack of which is potentially one of the biggest barriers to the industry’s future growth. It also says it will work with industry to assess the feasibility of blending 20pc hydrogen into existing gas supply.

Winning formula?

Crucially, the new strategy offers more clarity on the government’s intentions regarding incentives for hydrogen production—a move that will please investors—with the scheme scheduled to start in 2023. Ministers have launched a consultation on a preferred business model for hydrogen which they say is “built on a similar premise” to the contract-for-difference model used to support the expansion of offshore wind. Offshore wind is widely seen as a major renewables success story for the UK and will be highlighted by the government when it hosts Cop26 later this year.

“The government’s approach is based on the UK’s previous success with offshore wind, where early government action, coupled with strong private sector backing, has earned the UK a world-leading status,” the government says.

The hydrogen technology industry has welcomed the move to clarify incentives. “The industry needs a policy landscape in place that identifies priorities and support mechanisms for rolling out green hydrogen production in the UK and that is just what today’s hydrogen strategy sets out,” says Graham Cooley, CEO of electrolyser manufacturer ITM Power.

Direct financial support outlined in the new strategy via various funding schemes amounts to around £1bn, less than the commitments made by other European governments, notably Germany. “The underpinning innovation programme is absolutely essential, although direct funding of £105mn and future £240mn may not be enough and is dwarfed by Germany's €8bn commitment,” says Professor Martin Freer, director of the Birmingham Energy Institute, part of the University of Birmingham.

20-35pc – Potential share of UK energy demand met by hydrogen in 2050

On the demand side, the government is bullish on hydrogen, with projections that it could meet 20-35pc of energy consumption by 2050. This implies hydrogen demand more than doubling by 2030 and increasing by nearly 20-fold by 2050, says consultancy Aurora Energy Research, which adds that this is 25pc higher than its own high scenario for 2050.

The government says it will support the deployment of hydrogen across the UK by working with industry to develop a UK standard for low-carbon hydrogen  in 2022, “giving certainty to producers and users that the hydrogen the UK produces is consistent with net zero”.

The UK’s standard may be less stringent than the EU taxonomy in order to include blue hydrogen, says Aurora.

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Author: Stuart Penson